Today’s episode is taken from a REIA meeting. The speaker, Jonathan Mednick from Real Equity, has completed over 1,000 deals. During this episode, you’ll hear Jonathan talk about his journey through his real estate career, as well as share tips and strategies on wholesaling, managing multiple streams of income, benefits of getting your Realtor®’s license, and more!
Key Takeaways:
[2:01] Jonathan is originally from New York and has a background as a trained musician. As he was pursuing his music career, he ended up in a big band on a cruise ship and spent five years in various capacities at sea.
[3:39] When he retired from the cruise ship, he started a consulting business that provided the staff for cruise ships. After doing this for three years, he sold the business and moved to Ft. Lauderdale to work for a web design firm. After the dot-com bust, he started his fourth career — in real estate investing.
[6:55] While working through Carleton Sheets’ course on real estate investing, Jonathan attended his local REIA meetings to get educated and get started.
[9:55] Jonathan shares the story of his first few deals while he was still living in Florida and the beginning of his career in the real estate market in Florida. He started wholesaling and was averaging about five deals a month and making an average of $5,000 a month.
[13:30] He joined forces with some different colleagues in real estate and started fixing and flipping houses. The real estate market crash of 2007 really hit them hard, and he had to come out of that on the other side.
[17:30] Jonathan went back to basics — for him wholesaling — and focused on paying the bills and working to pay off his debt. He started flipping houses for a company in Jacksonville, and he eventually moved to Birmingham, AL, to flip houses in the market here.
[22:46] Along with his business partner, Jeff, Jonathan formed REI Trader and REITrader.com. REI Trader handles the investment side of the business, while REITrader.com is a platform that provides turnkey and wholesale properties for their clients and college referral fees. Jonathan shares what the company is doing today in the Birmingham area.
[25:05] Overnight success takes a long time. You’ve got to believe in yourself. For Jonathan, risk-averse real estate was his way out. You have to find the right deals that work for you and listen to the experts.
[29:00] Jonathan’s advice for beginners is to start with wholesaling. It is a minimal investment that is also low risk and is a quick exit.
[32:30] Jonathan sees a lot of wholesale deals. Some of the mistakes people make when submitting a deal are: 1. They overestimate values and don’t understand how to run comps. 2. No accurate renovation costs. 3. Inaccurate assignment fees. Many of these aspects are too subjective. Jonathan shares the things he does look for when people submit a deal: asking price, address, and accurate access instructions.
[37:48] How do they evaluate properties? They run their comps through MLS and CRS, and look for active, pending, and sold comps in the last 6 months and days on the market. They also look at what other investors are doing in the same market, and the quality of the property to figure out a strategy for the property. After comparing the subject property to the comps with certain criteria, Jonathan calculates an After Repair Value and goes from there to crunch the numbers on the property.
[42:48] He looks at what the returns are going to be, what the profit is going to be, and what the potential exit strategies are. Jonathan talks through the numbers of an example property, and how they evaluated it for their portfolio. They evaluate it in several different scenarios to see what the returns would be in each situation.
[48:15] Getting your Realtor®’s license: The biggest benefit of getting licensed is that you get access to the LMS. You are also entitled to some early commission. With a license, you can represent other investors; you can list their deals and help them sell their properties.
[52:20] It is a big time commitment to get your Realtor®’s license. There is also some monetary cost, but it’s an investment for your future. For Jonathan, it filled in a lot of gaps for him and ended up being very beneficial.
[55:25] There are several different avenues you can pursue to create multiple streams of income in real estate. Jonathan recaps some of the different ways you can make money in real estate, including passive investing. A passive investor can provide an interest-free loan, and they will get exclusive first right to purchase the property. Jonathan discusses short-term and long-term lending for passive investors.
[58:50] For people who do a lot of buying on the retail flipping side, it is important to have a sales team, general contractors, a project manager, perhaps an interior designer/stager, and an admin. closing coordinator. You also may need someone for marketing, a good closing attorney, a finance person, and private lenders.
[1:03:02] Jonathan talks about some of their current projects — each with their own exit strategy.
[1:05:47] Jonathan explains how to calculate your cap rates. For gross cap rate, take monthly gross income times twelve, and divide that by your total purchase price and closing costs. For net cap rate, take your gross yearly cap rate and knock off about 30% for expenses. Divide that by total purchase price and closing costs and that is your net cap rate.
[1:13:30] Jonathan talks about some of their services: wholesaling, turn-key properties, renovations, as well as private investing.
Mentioned in this Episode:
ALAREIA Website
Meetings
Daily REIA Show
Facebook Page
Real Equity
REI Trader
Courthouse Retrieval System
